Prescription for Economic Recovery By Rep. Nydia Velazquez (D-NY)
Article Date: 03-01-2009
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The current health care cost burden on small business is unsustainable and adversly impacts their ability to hire.
Editor’s Note: AED regularly invites leading members of Congress and members of the Washington policy community to speak directly to AED members through this column. This month’s contribution is from Rep. Nydia Velázquez, the chairwoman of the U.S. House of Representatives Small Business Committee. In recent years, Chairwoman Velázquez has been a critical ally for AED on tax, regulatory reform, infrastructure, and small business health insurance issues.
Earlier this month the House Committee on Small Business held the first U.S. House of Representatives hearing of the 111th Congress on health care reform. Small business leaders and insurance providers testified before our Committee about how the rising cost of medical insurance is forcing many businesses to scale back coverage for their employees. During the hearing, one thing became clear: Addressing the issue of health care reform will be necessary if our nation is to enjoy a full economic recovery.
For a number of reasons, smaller firms carry the brunt of escalating health care costs. Small businesses generally have higher administrative costs for health care coverage. With fewer employees over which to spread risk, small business employers pay higher premiums than those of large companies. As a result, coverage for small business workers has dropped off significantly. In less than a decade, it has declined by 16 percent for some of the smallest firms.
Even worse, the rising cost of health care is compounding our current economic difficulty. For many smaller firms, rising health care costs are now influencing hiring decisions and making it harder to bring on new employees in an already difficult economic climate. During our hearing, one witness testified that rising health care costs have forced him to only hire part-time workers, rather than hiring full-time workers who would be provided coverage. The same witness testified that he knew of businesses that had laid-off workers solely because of health care costs.
Clearly, the current system is unsustainable. If small businesses are to contribute to our nation’s economic recovery, they will need relief from the skyrocketing cost of health care coverage. Last Congress, working in a bipartisan manner, members of the House Small Business Committee introduced the Small Business Cooperative for Healthcare Options to Improve Coverage for Employees Act, or the “CHOICE Act.” This legislation would have gone a long way in addressing small employers’ health care needs. On the day of our hearing, I joined the top Republican on the Committee, Rep. Sam Graves (R-MO), to reintroduce this measure for the new Congress.
The CHOICE Act would help small businesses offer health insurance through a refundable tax credit of 65 percent. The legislation minimizes risks for insurance companies by letting small firms pool their employees with those of other businesses in voluntary health cooperatives. That would allow entrepreneurs to negotiate better rates for coverage for their employees and themselves. Self-employed individuals would save $5,000 per year on health coverage costs. Other small firms would save more than 34 percent. The end result: Fewer uninsured Americans and a more competitive business sector. It is our hope that we can build the necessary consensus to move this important legislation during the 111th Congress.
As Congress and the nation consider the current economic stimulus legislation, it is critical that health care reform play a role in the process. In my view, addressing health care costs will be as vital to economic recovery as bringing transparency to Wall Street and getting credit markets flowing again. Unless we can find a way to make small business coverage more affordable, the benefits of any economic recovery may be limited and short-lived.
The facts are simple: The more money that small firms pour into health care, the less capital they have for bringing on new workers and expanding their firms. If it is to be successful, our economy needs to be creating new jobs. Small businesses can do it; they have led our nation out of economic downturns in the past. But, they are going to need assistance, beginning with a concerted effort to tackle health care reform.
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